The following is the unofficial transcript of a first on CNBC interview with Former Federal Reserve Chairman Alan Greenspan on CNBC's "Closing Bell" today. All references must be sourced to CNBC.

In a first on CNBC interview, CNBC's Maria Bartiromo interviews Former Federal Reserve Chairman Alan Greenspan on CNBC's "Closing Bell." During the interview, Greenspan discusses the record prices of oil and the impact on the economy, recession, the housing market, economic growth, China and commodities, among other topics.

BARTIROMO: FORMER FEDERAL RESERVE CHAIRMAN ALAN GREENSPAN SAYS THE ODDS OF U.S. RECESSION ARE NOW LESS THAN HALF. AND IT'S STOCK PRICES MOVE HIGHER FROM HERE, HE SAYS IT SHOULD BALANCE OUT DECLINES IN HOME PRICES. IN ANOTHER FIRST ON CNBC INTERVIEW I'M JOINED RIGHT NOW BY THE FORMER FEDERAL RESERVE CHAIRMAN ALAN GREENSPAN NOW THE AUTHOR OF THE NEWLY RELEASED BOOK, THE AGE OF TURBULENCE. NICE TO HAVE YOU BACK ON "CLOSING BELL", WELCOME.

GREENSPAN: THANK YOU.

MARIA: GOOD TO SEE YOU AGAIN. LET ME ASK YOU ABOUT THAT ECONOMIC LANDSCAPE RIGHT NOW. WE'VE SEEN SUCH A TIGHT CREDIT ENVIRONMENT HERE IN THE UNITED STATES AND OF COURSE, A SLOWING HOUSING MARKET. ARE YOU EXPECTING THE SLOWDOWN HERE TO TAKE SOME OF THE SPARK OUT OF THE INTERNATIONAL ECONOMIES WHICH OF COURSE HAVE BEEN REALLY WHERE THE REAL GROWTH STORY HAS BEEN?

GREENSPAN: WELL, ONE WOULD CERTAINLY EXPECT SOMETHING BECAUSE THE-- THE EMERGING MARKETS OR THE UNDEVELOPED COUNTRIES OR LESSER DEVELOPED COUNTRIES THAT WE SOMETIMES ALL CALL THEM ARE DOING EXCEPTIONALLY WELL. AND THERE'S NO EVIDENCE THAT THEY'RE WEAKENING, BUT OBVIOUSLY CHINA IS AT THE CENTER PART OF THAT AND AT SOME POINT THIS 10% RATE OF INCREASE-- ANNUAL RATE OF INCREASE IS PRESUMABLY GOING TO SLOW DOWN, BUT IT HASN'T YET.

MARIA: WELL, YOU'VE SPOKE BEEN CHINA AND THE FANTASTIC GROWTH THAT WE'RE SEEING THERE. IS THERE A NEGATIVE TO THAT FOR THE UNITED STATES IN ANY WAY? I MEAN, YOU KNOW, I MEAN IS THE MOVE IN THE STOCK MARKET THERE BASED ON REAL FUNDAMENTALS? DO YOU THINK THE GROWTH CAN SUSTAIN AT THESE LEVELS?

GREENSPAN: WELL, I WOULD CERTAINLY SAY THAT THE SHANGHAI AT SHENZHEN MARKETS ARE NOT SUSTAINABLE VERY LONG, BUT I THINK THE CRUCIAL ISSUE IS THAT WITH DEVELOPING COUNTRIES MOVING SO RAPIDLY, AND SO MUCH OF WORLD ECONOMIC ACTIVITY DEPENDING ON THEM, WHAT WE'RE FINDING IN THE UNITED STATES, FOR EXAMPLE, IS UP TO A THIRD OF OUR EARNINGS ARE COMING FROM ABROAD. NOW, TO BE SURE, HALF OF THAT IS EUROPE, BUT AN INCREASING PART IS IN THE DEVELOPING NATIONS AND SO THAT THE U.S. STOCK MARKET IS NOT TIED TO THE AMERICAN SCENE SO MUCH AS IT USED TO BE.

MARIA: RIGHT, BECAUSE IT REALLY IS A GLOBAL STORY HERE. WELL, WHAT ABOUT THE U.S.? I MEAN, WE'RE REALLY TALKING ABOUT A MATURE MARKET HERE, RIGHT, MR. CHAIRMAN? I MEAN, AT SOME POINT, DON'T YOUHAVE TO BELIEVE THAT WE'RE PROBABLY SEEING THE BEST GROWTH LEVELS THAT WE'RE GOING TO SEE FOR A LITTLE WHILE RELATIVE TO INTERNATIONAL MARKETS?

GREENSPAN: WELL, I THINK WE'RE DOING THAT NOW. IT'S FAIRLY APPARENT THAT EVEN THOUGH THE CREDIT CRUNCH IS EASING, IT'S RESIDUAL AND ITS IMPACT, FOR EXAMPLE, ON LIBOR AND OTHER MAJOR RATES IS GOING TO SLOW THIS ECONOMY DOWN TO A CERTAIN EXTENT, AND INDEED, YOU CAN SEE IT, NOT IN THE THIRD QUARTER DATA, BUT ALMOST CERTAINLY GOING TO SEE IT IN THE COMING QUARTER, BUT AS YET, THE ODDS OF A RECESSION ARE STILL LESS THAN 50/50.

MARIA: SO, IT'S FAIR TO SAY THEN THAT WE MAY VERY WELL NOT HAVE SEEN THE WORST THEN IN TERMS OF THE IMPACT OF THE CREDIT TIGHTNESS BECAUSE IT SOUNDS LIKE WHAT YOU'RE SAYING IS WE'RE GOING TO CONTINUE TO SEE THE RESIDUAL, RESIDUE OF THAT IN THE FOURTH QUARTER?

GREENSPAN: OH, I THINK AND INTO THE FIRST QUARTER AS WELL. THIS IS A SHOCK TO THE SYSTEM. AND WE'RE ALSO OBSERVING OTHER PHENOMENA WHICH SUGGESTS THAT INNOVATION IS SLOWING DOWN INITIALLY, WHICH I RAISE IN MY BOOK, AND THAT'S NOT A LONGER TERM ISSUE, BUT IT'S A SHORTER TERM ISSUE, BUT ENOUGH TO SLOW DOWN CAPITAL INVESTMENT IN THE SHORT RUN AND CREATE SOME DAMPENING IN THE ECONOMIC GROWTH RATES IN THE UNITED STATES.

BARTIROMO: LETS ME ASK YOU ABOUT ENERGY INDEPENDENCE. I KNOW YOU TALK A LOT ABOUT THIS AND YOU WRITE ABOUT THIS IN THE= BOOK. NOW, TODAY ON OUR AIR, MR. CHAIRMAN, SOMEBODY PREDICTED THAT OIL WOULD HIT $100 A BARREL BY YEAR END. BASED ON YOUR KNOWLEDGE OF THE SUPPLY OF OIL AROUND THE WORLD, OR THE POTENTIAL OF-- FOR OIL SUPPLIES, DO YOU THINK THAT PRICES ARE JUSTIFIED WHERE THEY ARE RIGHT NOW, WHICH, BY THE WAY, ARE $86 A BARREL?

GREENSPAN: PRICES IN THE MARKETPLACE AS BROAD AND AS DEEP AS THE OIL MARKET ARE BY DEFINITION THE RIGHT PRICE. ANYONE WHO'S GOT A DIFFERENT VIEW IS BRINGING INFORMATION TO THE MARKET-- TO THE MARKET WHICH IT DOESN'T HAVE, SOMETHING I DOUBT VERY MUCH.

MARIA: SO THEN YOU THINK THAT BASED ON THE SUPPLY OF OIL AROUND THE WORLD AND THE POTENTIAL FOR SUPPLY AND PRODUCTION, OIL SHOULD, I MEAN, I UNDERSTAND WHAT YOU'RE SAYING, FREE MARKETS OR THE MARKET WILL ADJUST THE PRICE, OBVIOUSLY, BUT I'M TALKING ABOUT REAL FUNDAMENTALS IN TERMS OF OIL AROUND THE WORLD.

GREENSPAN: THE BASIC PROBLEM WITH OIL IS NOT THE FACT THAT WE DON'T HAVE ENOUGH CRUDE OIL IN THE GROUND. WE DO, BUT IT'S LOCATED IN PLACES WHERE NATIONAL OIL COMPANIES HAVE MONOPOLYS AND THEY'RE USING A VERY SIGNIFICANT PART OF THEIR CASH FLOW FOR DOMESTIC PURPOSES AND NOT TO BE PLOWED BACK TO INCREASED CRUDE OIL PRODUCTION CAPACITY. WHICH HAS BEEN MOVING AT A VERY SLOW PACE AND AS DEMAND PICKS UP AS IT HAS IN CHINA AND ELSEWHERE IN THE DEVELOPING WORLD, WE'RE BEGINNING TO SEE A GRADUAL PRESSURE ON THE PRICE LEVEL AND WHEN YOU GET A SITUATION WHERE WE HAVE VERY LITTLE BUFFER, WHICH IS THE CASE TODAY, AND YOU GET GEOPOLITICAL ISSUES AS THEY'RE OCCURRING TODAY IN TURKEY AND IRAQ, YOU GET PRESSURE ON PRICES. THIS IS WHAT MARKETS ARE SUPPOSED TO DO.

MARIA: ALL RIGHT, LET'S SAY MARKETS DO WHAT THEY DO, WE DO SEE OIL AT $100 A BARREL. WHAT KIND OF IMPACT WOULD THAT HAVE ON THE ECONOMY?

GREENSPAN: WELL, SO FAR, $80 OIL HAS NOT HAD ANY REALLY SIGNIFICANT IMPACT. AND THE REASON, OF COURSE, IS THAT WE HAVE VERY GRADUALLY, BUT PERSISTENTLY PHASING OUT OIL IN THE WORLD'S GROSS DOMESTIC PRODUCT. THE RATIO OF CONSUMPTION OF OIL OR ENERGY RELATIVE TO WORLD GDP AND BOTH DEVELOPING AND DEVELOPED WORLD, HAS BEEN DECLINING AND THAT'S ONE OF THE REASONS WHY WE HAVE BEEN ABLE TO MAINTAIN FAIRLY STRONG AND BUOYANT ECONOMIES IN THE FACE OF VERY HIGH CRUDE OIL PRICES.

MARIA: OF COURSE, MR. CHAIRMAN, IT'S NOT ONLY OIL WE'RE WATCHING MOVE HIGHER, YOU'VE GOT THE PRICE OF FOOD GOING UP, AND CERTAINLY THE RAW MATERIALS WE TALK ABOUT. HOW MUCH ATTENTION DO YOU THINK THE FEDERAL RESERVE SHOULD BE SPENDING OR PAYING ATTENTION TO THIS IN TERMS OF DETERMINING WHETHER OR NOT TO EXPAND CREDIT FURTHER?

GREENSPAN: WELL, REMEMBER THE NOTION OF LOOKING AT A CORE PRICE REQUIRES THAT YOU PRESUME THAT ENERGY AND FOOD HAVE NO LONG-TERM TREND. AND THAT THEY'RE FLUCTUATIONS ARE ESSENTIALLY RANDOM. THAT IS NOW BECOMING AN INCREASINGLY QUESTIONED PREMISE WITH AGRICULTURAL SUPPLY NOT KEEPING UP WITH RAPIDLY RISING DEMAND, ESPECIALLY FROM DEVELOPING NATIONS AND AS WE'VE SEEN, THE PRICE OF CORN, THE PRICE OF WHEAT, THE PRICE ABROAD RIGHT ACROSS THE WHOLE AGRICULTURAL STRUCTURE, VERY SUBSTANTIAL INCREASES AND THERE'S A MAJOR QUESTION AS TO WHETHER OR NOT THE NOTION THAT IT IS A RANDOM FLUCTUATION AND WILL RETURN TO ITS AVERAGE OVER THE LONG RUN, THERE'S A VERY SERIOUS QUESTION WHETHER THAT'S ACTUALLY CORRECT. CERTAINLY NOT CORRECT WITH THE ISSUE, ISSUE OF ENERGY.

MARIA: SO IT SOUNDS LIKE YOU'RE NOT WORRIED ABOUT THE PRICE OF OTHER COMMODITIES AWAY FROM OIL?

GREENSPAN: WELL, OTHER COMMODITIES ARE NOT AS IMPORTANT LARGELY BECAUSE WE'RE PHASING OUT THE HEAVY INDUSTRY PART OF THIS WORLD ECONOMY. AS I'D LIKE TO PUT IT, THIS IS' AN EVER INCREASING AMOUNT OF CONCEPTUAL GDP BEING PRODUCED IN EVER LESS THAN THE AMOUNT OF PHYSICAL THINGS. AND IT'S LARGELY THE PHYSICAL THINGS THAT WE PRODUCE THAT WEIGH SOMETHING WHICH YOU CAN SEE, YOU CAN FEEL, THAT CREATE ENERGY REQUIREMENTS AND THEY ARE PHASING DOWN.

MARIA: MR. GREENSPAN, HOW HELPFUL HAS THE DOLLARS FALL BEEN IN TERMS OF THE U.S. ECONOMY?

GREENSPAN: WELL, IT OBVIOUSLY HAS HAD A SIGNIFICANT IMPACT ON EXS PORTS, EXPORT DEMAND HAS BEEN NOTHING SHORT OF EXTRAORDINARY IN THE UNITED STATES AND IT'S BEEN A-- IT WILL BE A KEY FACTOR, FOR EXAMPLE, IN THE THIRD QUARTER GDP, SOMETHING IN THE AREA OF A FULL PERCENTAGE POINT. NOW APPEARS TO BE INVOLVED IN THE DOWN SHIFT IN THE TRADE DEFICIT.

MARIA: AND OF COURSE, WITH SOVEREIGN FUNDS PRETTY ACTIVE RECENTLY, AND TALKING ABOUT THE IDEA THAT THEY WANT TO GET OUT OF DOLLAR DENOMINATED SECURITIES IS THERE ANY REASON TO BELIEVE THAT SITUATION REVERSES ITSELF?

GREENSPAN: I'M NOT SURE AND I'M NOT SURE IT'S THAT ALL IMPORTANT. WE'VE HAD CONSIDERABLE EXPERIENCE OF VERY LARGE QUANTITIES OF U.S. TREASURY ISSUES OR OTHER DOLLAR FUNDS MOVING AROUND THE WORLD AND THEIR IMPACT HAS NOT BEEN LARGE, I MEAN, FOR EXAMPLE, REMEMBER THE JAPANESE WERE ACCUMULATING VERY SUBSTANTIAL AMOUNTS OF DOLLAR DENOMINATED SECURITIES PRIOR TO MARCH, 2004, IN AN ENDEAVOR TO AFFECT THEIR EXCHANGE RATE. THEY STOPPED COLD IN MARCH, 2004 AND NOTHING HAPPENED. THIS SUGGESTS THAT THESE MARKETS ARE EXTREMELY EFFICIENT AND WHEN WE'RE TALKING WELL IN EXCESS OF 100 TRILLION DOLLARS IN THE WORLD OF INTERCHANGEABLE TYPES OF SECURITIES OF THIS TYPE, TO BE SURE, A SIGNIFICANT AMOUNT OF SLOWDOWN IN PURCHASES OR EVEN SALES BY EXAMPLE, CHINA WHICH HOLDS ABOUT CLOSE TO 1 1/2 TRILLION DOLLARS AT THE MOMENT. THAT'S GOING TO HAVE SOME EFFECT, BUT NOT A HUGE EFFECT AT LEAST ON THE BASIS OF WHAT HISTORY TELLS US.

MARIA: AND FINAL QUESTION, MR. CHAIRMAN, LET ME ASK YOU ABOUT WHERE WE ARE IN TERMS OF HE ECONOMY RIGHT NOW. HOW WOULD YOU CHARACTERIZE THINGS? KNOW YOU GAVE US YOUR PREDICTION AS FAR AS THE ODDS OF RECESSION, BUT DO YOU THINK E'VE SEEN THE WORST IN TERMS OF HOUSING AND IN TERMS OF THE REDIT SITUATION AND YOUR THOUGHTS ON THE TREASURY'S PLAN TODAY WITH THE MAJOR BANKS IN TERMS OF OFFLOADING SOME OF THAT BAD DEBT?

GREENSPAN: WELL, FIRST OF ALL, WE CERTAINLY HAVEN'T SEEN THE WORST OF HOUSING, IN FACT, THE MAJOR CONSTRAINT ON THE UNITED STATES AT THIS MOMENT IS A VERY LARGE OVERHANG OF NEWLY BUILT, BUT VACANT HOMES WHICH HOME BUILDERS FIND VERY EXPENSIVE TO MAINTAIN AND ARE GRADUALLY BEGINNING TO THROW THEM ON THE MARKET. THAT IS PRESSING PRICES DOWN WHICH OBVIOUSLY IS AFFECTING HOME CONSTRUCTION, BUT FAR MORE IMPORTANTLY, IT'S LOWERING THE EQUITY BUFFER IN HOMES, WHICH MEANS THAT THE VERY LARGE HOLDINGS OF ASSET-BACKED SECURITIES, SPECIFICALLY SUBPRIME ASSET BACKED, ARE POTENTIALLY THREATENED WITH RESPECT TO A GREATER DEGREE OF FORECLOSURE THAN IS CURRENTLY DISCOUNTED IN THE MARKETPLACE. SO, REALLY, IT GETS TO THE POINT OF AN ISSUE WHICH WE REALLY CAN'T FORECAST VERY WELL. IT'S HOW MUCH WILL THE PRICE OF HOMES GO DOWN AS A CONSEQUENCE OF HOME BUILDERS FINALLY BRINGING THEIR INVENTORIES FROM TWICE WHAT THEY OTHERWISE OUGHT TO BE DOWN TO NORMAL.

MARIA: ALL RIGHT. WE WILL LEAVE IT THERE MR. CHAIRMAN. NICE TO HAVE YOU ON THE PROGRAM. THANKS VERY MUCH.

GREENSPAN: MY PLEASURE.

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